Can Financial Engineering Cure Cancer?
Funding for early-stage biomedical innovation has been declining at the same time that medical breakthroughs seem to be occurring at ever increasing rates. One explanation for this counterintuitive trend is that increasing scientific knowledge can actually lead to greater economic risk for investors in the life sciences. While the Human Genome project, high-throughput screening, genetic biomarkers, and gene therapies have been tremendously positive for clinicians and their patients, they have also increased the cost and complexity of the drug development process, causing investors to shift their assets to more attractive investment opportunities. However, the tools of financial engineering—portfolio theory, securitization, credit default swaps, and other commonly used financial techniques—can be used to reduce the risk and increase the attractiveness of biomedical innovation so as bring new therapies to patients faster.